Snail, Inc.

Ladies and gentlemen, today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience.

Thank you for standing by, and welcome to Snail, Inc.' 's fourth quarter and full year 2025 earnings call and webcast. I would now like to turn the call over to Steven Shimachi with Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Snail, Inc.' 's fourth quarter and full year 2025 earnings conference call and webcast. Joining us for today's call are Snail, Inc.' 's Chief Executive Officer, Hai Shi, Chief Financial Officer, Heidi Chow, and Senior Vice President, Director of Business Development and Operations, Peter Kang. The company's fourth quarter and full year 2025 earnings press release was filed earlier today and is available on the investor relations section of Snail Inc.' 's website at www.snail.com or the SEC's website at www.sec.gov. During this call, management may make forward-looking statements regarding future events and the future financial performance of the company. Actual events or results may differ materially from our expectations, and forward-looking statements are subject to certain risks and uncertainties. Please refer to the company's Form 10-K that has been filed with the SEC and other SEC filings. The company makes these forward-looking statements as of today and disclaims any duty or obligation to update them or to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any statement is based. Additionally, on today's call, we referred to bookings and EBITDA, which are non-GAAP financial measures and provide useful information for the company's investors. You will find a historical reconciliation of bookings and EBITDA to the corresponding gap measures in the earnings press release and the company's SEC filings. And now I will turn the call over to Peter Kang, Senior Vice President, Director of Business Development and Operations of Snail. Sir, please proceed.

Thank you. Good afternoon, everyone. Thank you for joining us today to review our financial and operational results for the fourth quarter and full year ended December 31st, 2025. The fourth quarter capped a pivotal year for SNAIL and the ARC franchise. We closed 2025 with several key milestones, including the successful launch of ARC, Lost Colony DLC, the debut of a robust multi-year content pipeline for ASA, and meaningful advances across our broader portfolio and initiatives. Since ASA's launch in 2023, the remastered title primarily focused on updates which centered on introducing targeted features, improving game stability, and ongoing polishing. While these enhancements in the release of Ark Astreos and Ark Bob's Tall Tales strengthened the foundation and experience of the game, we had not yet released a full-scale expansion pack that truly broadened the narrative, gameplay depths, or overall scope of the ASA experience fully realize its long-term engagement potential. AHRQ Lost Colony changed that trajectory. Released last December, Lost Colony represents the first of many major standalone DLCs designed specifically to expand the ASA universe and deliver the kind of immersive, content-rich experience our global community has been anticipating. We were very encouraged by the early response of the DLC with pre-sale demands exceeding our internal projections and reinforcing the consumer appetite for deeper ASA content. More broadly, 2025 was a momentum building year for ASA. Since launch, the title surpassed 4 million units sold, supported in part by a meaningful acceleration in steam PlayStation, and Xbox downloads during the second quarter of the past year. Taken together, the traction we see across our titles and the sustained levels of player engagement continue to reinforce the durability and long-term strength of the ARK franchise. During the fourth quarter, ASA delivered strong performance with approximately 692,000 units sold, an average DAU of over 91,000 and a peak DAU of over 147,000. ASE also remained a consistent contributor with approximately 580,000 units sold in the quarter, average DAU of roughly 105,000 and peak DAU of about 137,000. Meanwhile, ArcMobile surpassed a major milestone of 10 million cumulative downloads and sustained an average DAU of approximately 130,000. Building on the strength of ASA's fourth quarter performance and the steady consistent result from both ASE and ArcMobile, we're entering a content rich and strategically important period for the Arc franchise. with ASA at the center of this next phase. During our December 2025 Investor Day, we outlined the next chapter of ASA's growth trajectory. The event featured Studio Wildcard co-founder Jeremy Stieglitz, who unveiled a comprehensive multi-year content roadmap for ASA that includes a robust slate of DLCs and content expansions designed to deepen the ASA universe, elevate engagement, and support durable long-term growth for the franchise. Beginning in 2026, we plan to release four major DLCs and content updates, including the Ark Survival of the Fittest remake, followed by Ark World Creator, Ark Bob's True Tales Tides of Fortune, and Ark Dragontopia. close out the year. Looking ahead in 2027, we plan to launch ARC Atlantis, ARC Bob's True Tales Galaxy Wars, and ARC Legacy of Santiago. In total, these seven significant releases represent one of the most ambitious expansion cycles ever planned for ASA and provide SNAIL with meaningful revenue visibility through 2027. Just last week, during the 2026 Game Developers Conference, we held a private invite-only event to provide additional insights into the timing of some of these upcoming content releases. Jeremy Stiglitz kicked off the event with new details on Ark World Creator, Bob's True Tales Tides of Fortune, and Dragontopia. Arc World Creator is a brand new in-game content creation tool for ASA that will support both console and PC players. Up till now, user generated content in Arc was largely limited to PC players using external tools. World Creator removes this barrier and broadens the accessibility of user generated content to console players as well. While this is not a paid for DLC or expansion pack, ARK World Creator introduces a wealth of new, personalized content tailored to each player's preference that we hope to further drive long-term engagement on ASA. We are targeting a May release for this new feature. Following that is the launch of ARK Bob's True Tale Tides of Fortune DLC scheduled for June, along with the free revamped Genesis Part 1 map for ASA. We also debuted an event-exclusive trailer highlighting the renewed look for Ark Survival of the Fittest and provided details around the upcoming Ark Dragontopia scheduled for December 2026. Separate from ASA, we were pleased to introduce PixArk Worlds. a new title and development featuring advanced user-generated content designed to expand the Ark universe onto Nintendo Switch 2 console. Needless to say, we are thrilled about the opportunities 2026 presents Snail as we continue to elevate the Ark franchise globally for players across both PC and consoles. Beyond Ark, We also announced several updates across our broader gaming portfolio. Starting with our indie portfolio, we unveiled a brand new title, Gobby Gang, during GDC. Additional indie titles in the pipeline include Stone Guard, Above the Snow, and Survivor Mercs, to name a few. We also recently celebrated Bellrite suppressing 1 million units sold. In 2026, we will be launching Bellwright's console ports to Xbox and PlayStation while working towards the eventual 1.0 release. We will also see Honeycomb in 2026 for a full 1.0 launch across PC and console platforms. Lastly, we are pleased to announce the significant progress made across three developing titles for the stars, Nanyan Sutra Immortal and Nanyan Sutra Wushu. These three titles are all AAA projects, meaning they are high budget, high profile games designed to deliver expansive worlds, cutting-edge visuals, and strong marketing campaigns that far exceed typical games we have launched and licensed. As a reference, Ark is considered a AAA game as well. While the three games I mentioned are smaller in scale than Ark, these titles offer immense upside potential. we have invested considerable time and resources into each game, and they are now in the final stages of their development cycle. We believe we are approaching the point where our long-term investment can fully realize its potential, and we look forward to sharing updates as we make progress throughout the year and into 2027. At GDC, we shared an event-exclusive trailer and early concept art of For the Stars, providing a deeper look at the title's open universe exploration, player-driven research systems, and evolving frontier civilization themes. We believe Snail is well positioned for meaningful upside over the next two years, with ARK remaining the cornerstone of Snail, supported by a rich pipeline of content, continued investment in our indie titles, and three upcoming AAA games with substantial upside. We're excited about our trajectory and remain committed to delivering consistent long-term results. With that, I will now turn the call over to Heidi to discuss our financial results for the fourth quarter and full year ended December 31st, 2025. Heidi?

Thank you, Peter, and good afternoon, everyone. Thank you all for joining us today as I review our financial results for the fourth quarter and full year ended December 31st, 2025. Net revenue for the fourth quarter was $25.1 million compared to $26.2 million in the same period last year. The decrease was primarily due to a decrease of deferred revenues that were recognized during 2025 of $3.5 million that were partially offset by our increased sales of the ARC franchise of $1.3 million and our Bellwright franchise of $1.2 million. On a sequential basis, we are pleased to see Q4 net revenue increase 82% compared to $13.8 million in Q3 2025. Net revenues for the full year and December 31, 2025 were $81.2 million compared to $84.5 million in the same period last year. The decrease was primarily due to a decrease in recognition of deferred revenue of $15.5 million related to the ARC franchise. Increase in Bellwright and Myth of Empire sales of $1.5 million and $1.3 million, respectively. Upset by an increase in AFA sales of $11.3 million, Art Mobile sales of $2.4 million, and revenue generated from Salty TV app of $800,000. Net loss for the fourth quarter was $900,000 compared to a net income of $1.1 million in the same period last year. The decrease was primarily due to a decrease in gross profit of $1.7 million and an increase in operating expenses of $2.8 million, partially offset by an increase in other income of $2 million and the benefits from income taxes of $500,000. On a sequential basis, net loss improved significantly compared to the $7.9 million net loss in Q3 2025. Net loss for the full year ended December 31st, 2025 was $27.2 million compared to net income of $1.8 million in the same period last year. primarily due to a non-cash tax expenses related to the full valuation of our deferred tax assets of 10.1 million. Increase in general administrative expenses of 5.2 million. Increase in research and development of 2.9 million. Increase in advertising and marketing of 3.7 million. and impairment expenses of $1.5 million. EBITDA for the fourth quarter was lost $1.3 million compared to $1.6 million in the same period last year. The decrease was primarily due to the increase in operating expenses of $2.8 million. EBITDA for the full year ended December 31, 2025 was lost 16.8 million compared to 3.2 million in the same period last year. The decrease was primarily due to the increase in general and administrative expenses of 5.2 million, increase in research and development of 2.9 million, increase in advertising and marketing of 3.7 million, and impairment expenses of 1.5 million. While we experienced some one-off non-recurring headwinds during Q2 and Q3, we continue to reaffirm the strong fundamentals of the snail business. For the year, total units sold increased 32.7% to 6.3 million compared to 4.7 million units in the same period last year. This growth was primarily driven by an increase of 1.7 million units sold across the ARC franchise, partially offset by a combined decrease of approximately 100,000 units in Bellwright and West Ham sales. Bookings for the fourth quarter increased to 20.8 million compared to 17 million in the same period last year. The increase was primarily driven by a lower portion of our sales deferred in 2025. Changes in deferred revenue decreased by $4.9 million, while our met revenue decreased $1.1 million. Bookings for the full year ended December 31, 2025 increased 16.2% to $87.8 million, compared to $75.7 million in the same period last year. The increase was primarily due to an increase of ASE sales driven by the launch of ART Lost Colony, ART Astralis, and ASE's first sales event in June 2025 since the price drop in August 2023. Especially with the robots, our content pipeline for the next two years, we do expect booking to continue growing on a quarterly basis while adjusting for gradual content launches coming off the backlog. Lastly, as of December 31st, 2025, unrestricted cash was 8.6 million compared to 7.3 million as of December 31st, 2024. To review our detailed financial statements, please refer to the earnings press release and the Form 10-K file with the SEC. To close out the call, I would like to reiterate a few of the points Peter highlighted surrounding the significant momentum we carried out of 2025. As Peter mentioned, the latter half of 2025 was an especially exciting period for SNAIL and our art franchise. The increased visibility of the art pipeline we have provided put us in a strong position to deliver consistent annual results over the next two years. We also remain strategic and committed to expanding our broader game portfolio. We continue to invest in smaller titles such as Bellwright, Honeycomb, and our indie games. while also advancing our interactive film business. As of Q4 end, Salty TV had released over 100 short film dramas. Interactive films also expanded beyond short-form content into narrative-driven game development, which is a direction we expect to continue moving forward. Importantly, Our three upcoming AAA titles have reached the final stages of their development cycle. We believe these projects are a tremendous upside for the company, and we have dedicated as much time and resources to meet the potential these games hold. We expect profit margins to remain meaningful higher than what we typically see with external license titles. Additionally, The expensive content for each title supports a strong overall game lifespan. Beyond our gaming business, we also minted the first official U.S. deal stablecoin during our December Investor Day event. We are currently working towards a potential partnership opportunity tied directly to our stablecoin business. and we look forward to share more details later this year. 2026 and 2027 represent an exciting career for SMAIL as we further prove our standing in the broader digital entertainment ecosystem. The time and resources invested across many of our projects and initiatives are beginning to bear fruit. and we remain focused on executing our strategy to drive long-term sustainable growth. Thank you all for joining us today. We will not open the line for Q&A. Operator?

Thank you. Ladies and gentlemen, to ask the question, please press star 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Kopinski with Noble Capital Markets. Your line is open.

Thank you. I have a couple of quick questions. What is the ending deferred revenue balance in the quarter? Could you just give me that number? If you have it, Heidi.

Thank you, Michael. Our default revenue number, I think, is stated on our 10K, I think around $30 million.

Okay. And I was wondering if you could give us an update. I know that we talked about this in the past about the technology gap. Is that still persistent, or have there been some changes there?

Good question, Michael. I'll defer this question to our CEO, Mr. Haixi. He will answer that in Chinese and I will have a translator as well.

Thank you. Okay. 关于这个问题是这样,就是我们,我大概24年,我是24年回来做CEO的。 In fact, one of my main tasks is to turn the cattle listing system from an agent company to a full-fledged chain, which mainly includes R&D. In this regard, I will answer your question. One of our very important projects is Forestar. This project originally used a Flex engine developed by us. The advantage of this engine is its server end and its ability to deal with large data and the safety of data. Its history is that it is compared to Unreal Engine, it is in rendering and its efficiency will be relatively large.

Hello, this is Translator speaking. Mr. Schur stated that he became full-time CEO at Snail Inc. in 2024, and the main goal for Mr. Schur was to make sure that he could revamp the overall system for Snail as a publicly listed company, so that Snail's main focus could shift from a company that mainly publishes external games to have its own production pipelines, especially for a game development site. So to answer your question, out of the entire snail system, one of the important projects is For the Stars, or FTS. Initially, we're using our internal proprietary game engine. It's called Flexi Engine to develop that game. And the advantage of Flexi Engine includes its server management, processing capabilities for big data, as well as data security. However, compared to Unreal Engine, we can see that there are disadvantages for Flexi Engine for rendering, as well as efficiency.

But we should be in the end of 2024, the whole engine will be converted to virtual engine. In the process of transformation, we still used Flex engines on the server side. On the customer side, because we want to create planets that are round and can be excavated, the virtual engine does not have a pure plug-in or it does not support these things. So as a result, we upgraded our engine to Unreal at the end of 2024.

So now we're still using Flexi Engine to support the server side. And for the client-side, since we really want to create the sphere-shaped planets in-game, and also want to make sure that we have different mobile terrains, which for Unreal, there's not yet enough mature plugins to support that kind of goals. So right now, we're using Unreal Engine, and it's working very well for us, especially that we have very good server support and client-side support. And also, we can guarantee efficiency in development.

And very recently, we have fully upgraded to Unreal Engine 5.7.

So right now, we don't see any technical gap in game development anymore.

Terrific. If I could slip in just a couple of quick ones. Do you have a launch window for your AAA games at this point?

Thank you, Michael.

I'll defer that to our CEO, Mr. Haishi. Okay.

So actually our internal development system has been fully transformed and built in the past two years. So right now it's great timing for us.

首先是我们的工作室,我们的工作室从过去的在上市体系里面只有一个研发工作室,现在增加到了四个研发工作室。 The four R&D studios will have their own products this year, and the revenue of one of the R&D studios will be doubled from last year's revenue. So the whole R&D studio is very successful at the moment. Regarding the three games that we made directly internally, So before, Snail only had one internal development studio.

However, now we already have four development studios, and out of these four, three of them are working on their own in-house projects. And for one of the studios, because the revenue trend is very positive, so it's looking like we will be able to double the revenues of last year. So we're doing a very successful job at studio development. And then we have this ambitious goals for the internal, three internal in-house titles that we're working on right now. We are looking at about tens of millions of revenues here.

So all of these three in-house IPs will be immense IPs.

We are aiming to achieve $500 million in overall revenues for each IP. So the first IP is for the stars. This is a space-themed game.

So the first IP is for the stars. This is a space-themed game.

So for the stars, if for any mature gaming companies, if they're able to achieve a game of this size, then they will be able to also gain great revenues out of the project. For example, we have Starfield, No Man's Sky, and Star Citizen.

We have spent three years on the development of For the Stars, and now we are closing in on the development cycle.

The core development team is based in the U.S. Some of the production tasks are taken over by the Poland Studio, Rustic Roost, and some of the tasks were outsourced to our Chinese team.

This game has eight stages this year. At the end of this year, we will begin external testing. So the development cycle of this game includes eight sprints in total.

By the end of this year, we are anticipating that we will start external testing or public testing of the game. Actually, we have initially showcased the game at GDC, and we will show more in-game capture in the later half of this year.

And in For the Stars, we're able to achieve all the dreams of all the players who are passionate about space games. So actually the other two IPs were based off of the successful IP that we have released in the past in China. So actually the other two IPs were based off of the successful IP that we have released in the past in China.

The IP's name is Nine Sutra. This is coming from the Chinese culture. And in the past dozen of years, the IP has generated more than or about 800 million U.S. dollars in revenues.

So for these two IPs, the first one is Nine Sutra Immortal.

we're seeing that there's still great potential markets to tap into, especially because this is a new genre for the gaming industry, because so far there's no real cultivation games yet out on the market. We want to put in just the same efforts as we used to, just like how we developed the Chinese 9-suitra games.

The second is the Martial Arts of the 9th Battalion. In the past, after we created the Martial Arts, in fact, all the Martial Arts works in these years are still in the framework of our original creation. For the second IP under Nine Sutra, it's called Nine Sutra Wushu.

So in the past, for the Chinese IP, Age of Wushu, there were not major changes or innovative changes in the original framework. However, now, with Nine Sushou Wushu, we can consider it almost as a sequel of the original Chinese IP. We have implemented many different changes, and we are hoping that we can impress all the players. That's why we are very ambitious with this IP.

Yes, these two products will be tested this year.

For both of these IPs, for both of the nine social IPs, we will start testing this year.

We will participate in about, now it is determined that there will be three major exhibitions. China's Bilibili, China Joy and Germany's Cologne.

We have also confirmed that we will showcase all these IPs or both of these nine social IPs in three major gaming events this year. They include Illbili World, ChinaJoy, and Gamescom.

So the whole promotional plan is going to start this year?

Which means that we will have the campaign running the entire year for these IPs.

Terrific. Thank you for that, Collin. I really appreciate it. If I can slip one more question in. You have a very strong release roadmap through 2027, and I was wondering if you could just talk a little bit about the impact of margins, particularly as it relates to R&D and marketing spend. So if you could just talk a little bit about the marketing spend cadence around the upcoming launches.

Thank you, Michael. I'll defer the question for Mr. Xi to continue to answer the question.

As I just said, the three main products within our subsidiary, our goal is to have a relatively large IP board. So to be more specific, back then, we at least hoped that it could generate an income of $60 million to $80 million. As Mr. Hsu mentioned earlier, all of these three IPs will be the main revenue drivers of our company.

And they're all big IPs that we're working on. And to be more specific, we're hoping that the minimum we can have at least $60 to $80 million in revenues from each IP. So that's why we also don't want to fully release the games until they're definitely ready. And then we have big hopes for the revenues of these IPs.

So in the year of 26, our sales growth is mainly concentrated in these few pieces. One is that our Polish women's studio, their Songzhong project, and some of its original old projects. From the current Songzhong point of view, because it will be on the mainstream version this year, . . . . .

Um, so, uh, for our revenue growth in 2026, we're looking at mainly looking at, uh, several different projects. The first one is Bellwright developed by donkey crew in Poland. Uh, so, so far, uh, the, uh, revenues of the Bellwright is, uh, performing quite well. Uh, and this year we're going to release the console version of Bellwright. Oh, and this genre is actually not yet present on consoles yet. And then based on the revenues in the first quarter, our projections is that the revenues after council release can at least double the revenues of last year. So it looks like based on the current performance of Belt-Rite, we can expect $12 million

uh dollars and revenues from donkey crew and then the other thing is that they bought their studio last year they made a sea DLC actually this product is still very good but in terms of technology some of them are not ready yet so it caused some problems for the community but the entire studio has grown through this product so this year they will make The second one is Studio Sirens, who worked on Aquatica last year.

The product itself is quite decent. However, there were certain issues that might not be fully resolved in terms of the technologies, which might have caused concerns among the communities. But through developing this game, Studio Sirens is now more mature with their capabilities overall. And this year, they will work on Ark Survival of the Fittest, which is an esports game. And we're hoping that this game can bring a new peak of the Ark players and then also increase the revenues.

The second is that we are not only putting the entire research and development force into listed companies. In fact, we are also putting some IT into listed companies. They will accept a project called PixArc. This project has a low revenue of more than 2 million last year. If we accept it from them, we still have a lot of hope for it.

So other than building our development teams in the public company, we also want to include more IPs into our company, which includes PixArk. we want Studio Sirens to take over the development for Pixwork, which has made over $2 million last year. We have great hopes for Studio Sirens to work on this project because based on the past experience, they might go through a similar trajectory like Donkey Crew and can create millions of revenues in the future.

Okay.

Of course, Studio Sirens also has other plans and other projects to work on.

But overall, we will not be at a loss with this studio anymore. The third studio is Matryoshka Games.

So, in the past, Matryoshka Games was involved in the combat development for 9 Sutra Immortal. Now, this year, they are also working on their own project, which was announced at GDC, Gobby Gang. We have great hopes for this project as well. Gobby Gang is more of a fastly iterated project, similar to PEAK. It's under different slots in general. And then, we are hoping that the game can perform very well on the market.

So if he performs well, he may only have about $1 million of income. But if he is really like them, because the team has high expectations, if he is really like them, it will be easy to exceed $1 million of sales. Because he sells relatively cheaply, so about $10 million or so. This is their expectation.

If the game's performance is only medium, maybe we can at least sell about 1 million units. However, if we're able to actually achieve the expectations of the development team, then it should be easy for us to exceed the 1 million units target. We can probably even sell 10 million units.

The fourth studio that we have is Rustic Roost, which is based in Poland.

Right now they're helping with the For the Stars project, so they don't have their own projects to develop.

There is also an IF company. This year, there are more than 100 short-term projects. This year, it will increase to 700 to 800 short-term projects. At the same time, its interactive games will have a major project this year. It is similar to the theme of Spartax. The goal is also good. And we have another company called Interactive Films.

And then this year we will also work on a lot more short dramas with this company. So last year Interactive Films already produced over 100 short dramas. And then this year we will add another additional 700 to 800 short drama projects. And then this year, interactive films will also come out with this interactive game that is a Spartacus genre. And then our goal for that interactive game is to sell around 5 to 6 million units. However, we don't really have a successful experience in this field yet, so we cannot really guarantee that success.

So the growth of our revenue this year mainly comes from the several aspects we just talked about, including our agent games. So overall, revenue growth should be 20% to 30% higher than last year. This is what we can see.

So our revenue growth for this year mainly comes from the previous mentioned areas and also from the games that we are publishing. And so basically in general, the revenue will have a 20% to 30% of growth compared to last year.

Okay. So you said that you're interested in the plan for 2027.

However, most of the major actions will probably happen by then. And we hope that we can achieve something very great by the end of this year. If not, then it will happen in 2027. Terrific.

Thanks for the color. Greatly appreciate that. That's all I have.

Thank you, Michael.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. At this time, this concludes SNAIL Inc's fourth quarter and four-year 2025 conference call. If your question was not taken, please contact Snell Inc.' 's IR team at snal at gateway-grp.com. Thank you for your participation. You may now disconnect.